Gifts in a big package

Infrastructure-focused fund manager taps Fluor, FPL Group, Siemens

By

SamMamudi

NEW YORK (MarketWatch) -- The huge economic stimulus bill that Democrats have in the works is designed to kick-start the economy and create thousands of jobs. But the estimated $825 billion package should also be good news for investors in infrastructure stocks.

The legislation includes sums that would have been considered impossibly large before 2008's economic meltdown: $54 billion on various projects to make the country more energy efficient, $31 billion to build and repair public structures, $30 billion to build highways, $19 billion for water projects and $10 billion for transit and rail projects. See full story.

These numbers by themselves suggest that infrastructure companies are heading for a boom. But according to Aaron Visse, manager of Kensington Global Infrastructure Fund
KGIAX, -0.66%
the U.S. plan is just one part of a global push for infrastructure improvements.

"Most of the infrastructure in the developed world was built in the period between the end of World War II to the 1970s, and there's been under-development since then," he said. "And in the developed world they're dealing with an increase in urbanization."

Visse predicts that there will about $50 trillion spent on infrastructure worldwide in the next 25 to 30 years, and the various stimuli announced in response to the current crisis seems to be the start. China and Germany are among other major economies that have recently unveiled stimulus plans that involve a heavy component of infrastructure spending.

Visse's fund, launched in June 2007, typically holds about 60 stocks. He says it focuses on two types of companies -- those that own infrastructure projects and companies that build, and contribute to the building of, infrastructure. See story on infrastructure-related exchange-traded funds.

"It's not just construction and engineering companies, but also basic materials companies such as cement makers, steel providers and technology firms," the fund manager said. The slate of projects unveiled in the bill also suggest good times ahead for companies in the alternative energy, so-called environmental remediation -- which deals with cleaning up sites -- and waste management areas.

Fluor

Fluor Corp.
FLR, -1.74%
"a best-in-class engineering and construction company," Visse said. The company is widely diversified across the infrastructure industry - it is also involved in environmental remediation, for instance -- and its civil engineering business should benefit from road and building projects.

There are some concerns about Fluor, however, because much of its business is tied to the oil and gas industry, building infrastructure around facilities. And while Fluor has a heavy backlog of such projects, Visse said there are worries that with the low price of commodities some of these projects may be canceled.

"You can't ignore the concerns that they may face cancelations," he said. Fluor's fourth quarter earnings will be "interesting," said Visse, because they will show whether the fall in commodities prices has caused cancellations -- a signal for what the immediate future may hold.

But despite these fears, Visse is still hopeful about Fluor. "Once the economy stabilizes and governments are continuing to invest in infrastructure," the company will do well, he said.

Fluor's stock is down 8.2% so far this year and 38.6% over the past 12 months. On Wednesday, shares of Fluor closed at $43.03.

FPL Group

The stimulus package, dubbed the American Recovery and Reinvestment bill, has a heavy tilt towards clean energy, a fact that will help FPL Group Inc.
FPL, -0.33%
Visse said.

FPL has the largest wind capacity in the U.S., he noted, and has a large pipeline of wind energy projects.

"They're going to benefit from the clean energy push," said Visse.

Shares of FPL are down 6.2% in January and 33.5% in the past year. The stock closed at $48.33 on Wednesday.

Siemens

Germany's Siemens AG
SI
is a great example of a company that stands to benefit from the stimulus package in a number of ways, Visse said.

The company is a major technology supplier for power plants, and also manufactures wind turbines. Siemens' locomotive-building business should also be kept busy under the plan.

"Siemens is in a lot of different businesses that an Obama administration will focus on in the coming year," Visse said.

Shares of Siemens are down 25.2% in 2009. On Wednesday, the stock closed at $55.93.

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